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TIPS ON REQUESTING A CREDIT LIMIT INCREASE

TIPS ON REQUESTING A CREDIT LIMIT INCREASE

TIPS ON REQUESTING A CREDIT LIMIT INCREASE

You may be surprised to know that requesting (and hopefully being granted) an increase on credit limits on credit cards can take mere seconds. With current technology, gaining approval for an increase is a simple process. However, there are a number of things you should know before you make the request.

First, be aware that when you request an increase, there are two types of inquiries the company may make. If they make a “hard inquiry,” that means they are checking your actual credit report. You will be asked for your consent. A hard inquiry almost always shaves points off of your credit score, at least temporarily. A “soft inquiry” is generally used when a credit card company checks your credit to see if you are eligible for a special offer on their card. Soft inquiries do not affect your credit score. Hard inquiries generally area made when you are applying for major credit, such as mortgages.

It is wise to check your own credit (which qualifies as a soft inquiry) before you apply for an increase in your limit. The credit card company will most likely ask questions about your income, debt, rent or mortgage payments, and employment status. A good time to request an increase is shortly after you receive a pay raise or other additional income. It is also a good idea to check your credit utilization ratio, which is relatively simple: Calculate your total outstanding debt from all of your cards. Then calculate your total credit limit from all of the cards. After you complete those steps, divide the total outstanding balance by the total credit limit. Multiply this figure by 100 to get your credit utilization as a percentage. Experts advise you to keep your credit utilization under 30 percent. A higher limit may be helpful for you if you do not use most of it. That is because if anyone checks your credit you will have a lower credit to debt ratio. Still, it makes more sense to only ask for an increase if you really need it. The fewer checks on your credit report, the better.

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